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Apple: The New Microsoft
Posted Aug 31, 2009 10:55am EDT by Henry Blodget in Investing, Electronics, Internet, Media, Software and Services, Products and Trends, Mobile
From The Business Insider, Aug. 31, 2009:
Well, that didn't take long.
In a decade, Apple has gone from niche-market roadkill to a company whose growing dominance and competitive tactics in a booming market are thrilling investors, angering competitors, and drawing regulatory scrutiny.
Unless Apple shows a quick change of attitude, the benefit of its market position--power, scrutiny, and tens of billions in profit--are only going to grow.
Apple is no longer the beloved underdog that Microsoft kept alive in the late 1990s to improve its own standing in the eyes of regulators (remember the investment and agreement to keep building Office for the Mac?). Apple is now the wildly profitable owner of the dominant iPod platform and rapidly-becoming dominant iPhone platform, which are really one in the same. Unlike any other competitor in the industry, moreover--including the still PC-centric Microsoft--Apple has managed to link the two big personal computing platforms together, through its software and resurgent Mac business.
As Apple extends its lead as the mobile computing platform of choice--calling the iPhone a "phone" misses the point--Apple's dominance of this enormous opportunity will increase. This dominance should put Apple in a position to generate an extraordinary share of the value in the industry over the next decade, just as Microsoft did with desktop computing. The FCC investigation of Apple's rejection study of Google Voice, meanwhile, should serve notice that Apple's days of doing this beyond the gaze of regulators are over.
To appreciate why Apple investors are so excited--and why competitors and regulators are concerned--you need to understand the real source of value here. At first glance, Apple's market position seems much weaker than it actually is:
- less than 10% share of PCs (lower worldwide)
- ~ 1% of global phones
- ~ 20%-30% share of US smart-phones (lower worldwide)
- ~ 70% share of US standalone music players (50% worldwide)
If the standalone music player market were still booming, Apple would be getting a lot more heat for its market position. As Apple itself has admitted, however, standalone music players are dying. Fortunately for Apple, iPods aren't really "music players," and the larger mobile platform market is very much alive.
The iPhone and iPod touch are two gadgets based on a single mobile platform, one that now supports thousands of popular apps. To get a true picture of Apple's dominance of this platform, therefore, you need to look at the iPhone and iPod share together. And then you need to consider the relative popularity of Apple's mobile platform as a platform for apps versus the alternatives.
In reality, "music" and "phone calls" are just apps--and as Apple has already illustrated, they are far from the only ones. The real value in platforms is created by network effects: The more end users and developers that adopt a platform, the more valuable it becomes. Apple is already well on its way to owning the standard platform in mobile computing, just as Microsoft did on the desktop.
If you view iPhones and iPod touches as "mobile platforms that support a wide variety of third-party apps," Apple probably has 30%-40% of the US market (less worldwide). If you consider platforms that already have huge, vibrant developer communities, thousands of apps, and all of the momentum, however, Apple's share of this market (US) is probably more like 80%-90%.
This chart tells the story, and it's already three months out of date:
Google's Android is a player here, but it's relatively tiny. Android also has no mind-share outside the tech community. Nokia is a player internationally, but not in the US smartphone market. BlackBerry has a huge piece of US smart-phone market and a very loyal following, but it's still weak on third-party apps. In short, Apple is running away with this game.
The bottom line: The mobile market seems to be well on its way to becoming a platform market, just the way the PC market did. And Apple is well on its way to dominating this market, the way Microsoft did with PCs.
So it's no wonder that Apple investors are excited about the company's future. And it's no wonder that consumers, competitors, and regulators are already getting agitated.
See also from The Business Insider:
70 Comments
thomasromancer - Monday August 31, 2009 11:11AM EDT
Well if Apple is drawing the scrutiny of the government they must be doing something right. The government only scrutinizes that which it feels it must control. Cannot have a company make it on its own. That would set a bad precedent for the government dominated business utopia they are trying to propagate.
Jerrold - Monday August 31, 2009 11:16AM EDT
Been a Mac user for almost 25 years and I love the Macs reliability, ease of use and intuitiveness of the operating system. I have used both PCs and a Macs, but the Mac is far superior in my estimation.
Helga - Monday August 31, 2009 11:23AM EDT
GOVERNMENT MANIPULATION OF MARKET = WEEKEND AT BERNIE'S...............
joej - Monday August 31, 2009 11:24AM EDT
Break Up Apple!!! It is too big, too profitable and over charges on everything!!!! It is just an old style snarky monopoly hiding out beyond a very exacting and contrieved image of cooler than thou!!!!! The Apple fanatics are mostly societies unloved who happily line up in front of the Apple Store to have their bank accounts cleaned out. Get Real!!!!
Rey - Monday August 31, 2009 11:26AM EDT
Screw computers / Have you people noticed that no one is allowed to say anything bad about dummbama / It's against the law / that's a new law he wrote up in our constitution
Yahoo! Finance User - Monday August 31, 2009 11:27AM EDT
As the saying," Growth is the only evidence of life."
Frank S - Monday August 31, 2009 11:33AM EDT
As a Apple MacIntosh Owner & User its awesome to see my favorite Company (Apple Computer) become the Phenom that it is . The Apple's Operating System and the Superb Product that Steve Jobs Company Makes is FANTASTIC and the Quality and the Reliability is Spot On Awesome. The Apple's Operating Systems which was a rip off the Apple Graphic Interface makes the PC look pathetic and out of date. I hope the Company market Share in the Desktop and Portables florish and that the I-Pods and I-Tune have Greater Success. Try a Macintosh once and you will never go back to the PC. That is how Addictive and Fantastic the Apple Products are. I LOVE APPLE COMPUTER.
Larry - Monday August 31, 2009 11:33AM EDT
Great to see Mac users rushing in to get ahead of any comments that would smack a Mac.My bet is if they had a Mac that worked like crap they would call it swiss steak.Truely thou Apple people are strong in their belief that you might pay a lot more for a Mac but it is well worth the extra money.Good for you guys.Just compared Apples to Apples not Apples to peanuts.You figure it out.
David S - Monday August 31, 2009 11:33AM EDT
The iPhone is an amazing device and Macintosh computers are really great. But Apple, Google, Microsoft, Dell, HP, LG, Motorola, and all other mobile device manufacturers have their potential capped by the tyranny of cell phone service providers worldwide. For example, the iPhone is the perfect device for the international traveler but exhorbitant international roaming charges make it economically ridiculous to use. The cell phone service providers want a toll booth at every internet node and entry point. They spend their days trying to dream up new tariffs. They are becoming the primary limiter for these technologies -- a tourniquet on technological progress/
jerry - Monday August 31, 2009 11:34AM EDT
In business and as a personal computer, Microsoft products have always delivered superior results. Sure, there have been occasional problems, but when you have a 90% plus market share as opposed to something less that 5%, problems that do arise take a bit longer to solve. I'm sticking with a proven winner. I'm sticking with Microsoft.
Yahoo! Finance User - Monday August 31, 2009 11:39AM EDT
The reality is that Apple's growth is directly linked to Mr. Jobs, who is a brilliant innovator. Mr. Jobs, however, is very sick, first pancreatic cancer and now a liver transplant suggest that for health reasons Mr. Jobs will have to increasingly limit his time at Apple. When he decides to depart that will signal a very rough period for Apple. So enjoy Apple's dominance, but be wary as it may end quickly.
whitehanshorse - Monday August 31, 2009 11:42AM EDT
And as the apps grow, so too does the SiriusXM App. Launch of the SkyDock with a new app, is a good thing for both companies.
Yahoo! Finance User - Monday August 31, 2009 11:44AM EDT
Well I am biased, but will say this. Apple was the best personal computer back in the day and lead there too. Microsoft beat them out because it ran on many different companies hardware. Motorola, Nokia, Samsung, and everyone else's best chance is to all make Android phones. They don't want to because they are all still in the mind set that they can push their own proprietary platforms, but that won't happen anymore. Apple makes a great product, is everyone else going to go out without a fight? History repeats itself. See one an open "free" market looks like in America, 50k apps made by independents, yet at the same time big companies can't find capable engineers. Open the rest of the US economy up, go back to capitalism and watch everything turn around, or get a government job!
j2n272 - Monday August 31, 2009 11:46AM EDT
Apple is one up on Microsoft because of the exposure it has in many markets. Microsoft has been complacent and not competed but instead has rested on its laurels in the PC market. Now MS is paying the price and trying catch up.
MIchael - Monday August 31, 2009 11:49AM EDT
I run mac osx on a custom built pc. I have 4 times the computer that any of you have and I didn't have to stand in line and drink the kool-aid with all the mac freaks.
Dale - Monday August 31, 2009 11:56AM EDT
Upon learning in May 2006 that Apple was going to the Intel chip which would allow dual Apple / "Windoze" operating systems to work on the same Apple computer, I bought my 1st Apple computer - a MacBook Pro 17"- & repurchased AAPL stock at 70 $/sh. Alas, no complaints here! Also, becoming a member of a local Apple Users Group which has been meeting for over 20 years to share Apple hw & sw knowledge has been a blast! Goooo Apple !
Yahoo! Finance User - Monday August 31, 2009 11:57AM EDT
The double-standard on these boards is embarrasing. When it is in reference to the economy the sentiment is "hang all the CEOs" and then when it is Apple with its billionaire CEO, the sentiment changes to "I love Apple and Steve Jobs". You people give America a bad name. This is why people from other countries all think of us as mindless drones that blindly follow consumerism....and don't give me some crap about how banks don't produce anything and Apple does. Ask Steve Jobs what enabled him to invent the iPod/iPhone...financing from a bank/investment bank......clowns.
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Mark - Monday August 31, 2009 11:04AM EDT
I have my Power Mac G5 since sept. 2003. Only thing that went wrong was the graphics card that I replaced in March. Other than that, never been down or dead. Expensive to buy, but well worth it on the long run. Going on 6 years, and still does laps around my 2 year old PC with 2x the processor clock speed.